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TMI Blog2022 (10) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AR, ITA No. 481/Chd/2022 in the case of M/s. Shiv Shakti Constructions was taken as the lead case. 2.1. The brief facts in this case are that the Department was in possession of a certain information that the assessee firm had been used by another company M/s. S.P. Singla Constructions (Pvt.) Ltd. to book bogus expenses to bring down it profits and that the assessee firm had allegedly received bogus entries of Rs. 27,47,393/- from M/s. S.P. Singla Construction (Pvt.) Ltd. and Rs. 2,015,306/- from M/s. SPS Structures Ltd. during the year under consideration. Allegedly, no actual work had been done by this assessee firm as per the information. The AO proceeded to make inquiries u/s. 133(6) of the Income Tax Act, 1961 [in short 'the Act'] but the assessee firm did not furnish the required details. Therefore, the AO proceeded to issue notice u/s. 148 of the Act. In response to this notice, the assessee filed its return of income declaring income of Rs. 28,710/- from business u/s. 44AD of the Act. The assessee also filed objections against issuance of notice u/s. 148 of the Act. 2.2. During the course of assessment proceedings, the AO observed that a perusal of material ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the assessee firm to have been received from M/s. S.P. Singla Constructions (Pvt.) Ltd. and M/s. S.P.S. Structures were mere paper entries for allegedly reducing the profits of S.P. Singla Group of Companies and were in the nature of accommodation entries as no details of business activity done during the year had been provided by the assessee. 2.6. Thereafter, the AO required the assessee firm to show cause as to why commission at the rate of 8% on the total receipt of Rs. 48,18,768/-, as shown in the income Tax Return, may not be taken as income of the firm. The assessee was also required to show cause as to why the expenses of Rs. 1,32,000/- and Rs. 3,69,358/- being remuneration and interest respectively paid to partners may not be disallowed for the reason that the assessee had failed to provide a copy of partnership deed in this regard. 2.7. In response, it was the assessee's submission that it had carried out the work as a subcontractor and had filed the return of income u/s. 44AD of the Act on gross receipts of Rs. 48,18,768/- on which tax had duly been deducted at source by the two concerns from which the payments had been received i.e. M/s. S.P. Singla Construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions, shall not apply to- (i) a person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person carrying on any agency business" As such whole gross receipts of Rs. 48,18,768/- are required to be treated as commission income and the difference of Rs. 44,33,267/- (48,18,768 - 3,85,501) has not been taken into account as income by the AO while framing the assessment". From the aforesaid facts and circumstances of the case, it is noticed that the AO has failed to verify/enquire the aforesaid facts and has not made any enquiry in this regard. Therefore, the assessment order dated 30.12.2019 passed by the AO u/s. 147/143(3) of the Act is erroneous in as much as it is prejudicial to the interests of the Revenue." 2.10. In response to the aforementioned Show Cause Notice, the assessee submitted before the Ld. PCIT that the assessee firm had carried out the work as sub-contractor for which the payment had been received and that the return of income had been filed u/s. 44AD of the Act on the total turnover. It was further submitted that even if it was to be accepted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file of the AO for passing a fresh order in accordance with law in respect of the issue highlighted in the order passed u/s. 263 as well as in the Show Cause Notice issued u/s. 263(1) of the Act. 2.13. Now, the assessee has approached this Tribunal challenging the order passed u/s. 263 of the Act by raising the following grounds of appeal:- 1. That order passed u/s. 263 of the Income Tax Act, 1961 by the Learned Principal Commissioner of Income Tax, Patiala is against law and facts on the file in as much he has failed to show as to how the assessment order passed by the Learned Assessing Officer is erroneous in as much as prejudicial to the interest of revenue. 2. That the Learned Pr. CIT was not justified to hold that the order was passed by the Learned Assessing Officer without making enquiries and verifications and without properly examining the case thereby ignoring the fact that the matter had already been considered by the Learned Assessing Officer while framing the assessment. 3. That the Learned Pr. CIT failed to appreciate the import of detailed submissions made before him during the course of proceedings u/s. 263 while coming to the conclusion that the order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Assessing Officer while framing the assessment. 3. That the Learned Pr. CIT failed to appreciate the import of detailed submissions made before him during the course of proceedings u/s. 263 while coming to the conclusion that the order passed by the Learned Assessing Officer is erroneous in as much as prejudicial to the interest of Revenue. ITA 484/Chd/2022 1. That order passed u/s. 263 of the Income Tax Act, 1961 by the Learned Principal Commissioner of Income Tax, Patiala is against law and facts on the file in as much he has failed to show as to how the assessment order passed by the Learned Assessing Officer is erroneous in as much as prejudicial to the interest of revenue. 2. That the Learned Pr. CIT was not justified to hold that the order was passed by the Learned Assessing Officer without making enquiries and verifications and without properly examining the case thereby ignoring the fact that the matter had already been considered by the Learned Assessing Officer while framing the assessment. 3. That the Learned Pr. CIT failed to appreciate the import of detailed submissions made before him during the course of proceedings u/s. 263 while coming to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reason that the return had been filed u/s. 44ADof the Act and in that terms of this provision, the assessee was not required to maintain any books of account or bills/vouchers etc. as the income declared under this section is deemed to have been computed after allowing all expenses. It was submitted that in spite of the assessee having furnished the copies of the work contracts, the fact that the AO had chosen to reject the assessee's claim of having carried out sub-contract work and had treated the assessee's income as income from commission proves that there was due application of mind by the AO to the facts of the case. It was submitted that, therefore, the allegation of the Ld. PCIT that the AO had not carried out the required verification was not correct. It was further submitted that the AO had chosen to form a view by rejecting the assessee's claim of being a sub-contractor and by applying a rate of 8% for commission on gross receipts which was one of the possible view and the Ld. PCIT cannot, under the provisions of section 263, direct that the AO should take another view i.e. of taxing the gross amount, as receipts. 4.1. The Ld. AR also placed reliance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's case was reopened for the reason that a search had taken place in the S.P. Singla Group of cases, wherein during the course of search, the statement of the auditor of the said group Shri G.K. Garg was recorded, wherein it was stated that the S.P. Singla Group was involved in booking bogus expenses through a network of firms who were shown as sub-contractors. It was stated in the said statement that although these subcontractors did not execute any work, they were given payments which were debited as expenses in the books of accounts of S.P. Singla Group. The name of the assessee firm also figured in the list of such sub-contractor firms. Based on this information, the AO reopened the case of the assessee in terms of section 147 of the Act and in response thereto the assessee filed its return of income in terms of Section 44AD of the Act and also claimed deduction of salary and interest paid to partners. The assessee firm expressed its inability to provide any other documents or details except some worked contracts to justify its claim of having work as a sub-contractor. In fact, the assessee firm also did not furnish a copy of the partnership deed. Under these circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment; or (ii) an order modifying the order under section 92CA; or (iii) an order cancelling the order under section 92CA and directing a fresh order under the said section]. Explanation 1.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) an order passed on or before or after the 1st day of June, 1988] by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall include-- (i) an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer or the Transfer Pricing Officer, as the case may be, conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; [(iii) an order under section 92CA by the Transfer Pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded." 6.4. From the perusal of the aforesaid section, it is apparent that the powers of the revision can be exercised suo motu by the Ld. Commissioner. The Ld. Commissioner may call for and examine the records and any proceedings under the Act and for this purpose he need not show or record any reason. If, after calling for and examining the records, the Ld. Commissioner considers that the order of the AO as erroneous in so far as it is prejudicial to the interest of the Revenue, he is bound to give opportunity to the assessee of being heard and it is only after giving that opportunity, he may pass such order thereon as the facts of the circumstances of the case may warrant. It is also settled law that for invoking the provisions of section 263 of the Act, both the conditions i.e. the order passed by the AO being erroneous as well as being prejudicial to the interest of Revenue must be satisfied. If one of them is absent, the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO had made proper inquiries and had also duly applied his mind to the facts of the case. Therefore, the contention of the Ld. PCIT that no enquiry was made by the AO is factually incorrect. It is not a case, where no inquiry had been made by the AO. Merely because the Ld. PCIT felt that further inquiry should have been made does not make the order of the AO erroneous and prejudicial to the interest of the Revenue. 6.6. We also note that there is no incorrect application of law by the AO in the present case and further, the AO, after making inquiries and examining the records, has taken a view which is one of the possible views, and since this view is not unsustainable in law, it cannot be said that the order passed by the AO was erroneous in so far as being prejudicial to the interest of Revenue. Even at the cost of repetition, we reiterate that inadequacy of inquiry does not give jurisdiction to the Ld. PCIT to invoke his revisionary powers and set aside the assessment and nor does this section provide such powers to the Ld. PCIT that he can impose his view on the AO dictating him how a particular assessment is to be concluded. 6.7. It is further seen that the Ld. Pr.CIT has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2010) 332 ITR 167 (Delhi) has held that if there was any inquiry, even inadequate, that would by itself not give occasion to the Commissioner to pass order u/s. 263 of the Act merely because the Commissioner had a different opinion in the matter. It is a settled law that the Ld. Pr.CIT cannot pass the order u/s. 263 on the ground that thorough inquiry should have been made by the Assessing Officer. 6.11. Although, there has been an amendment in the provisions of section 263 of the Act by which Explanation 2 has been inserted w.e.f. 1.6.2015 but the same does not give unfettered powers to the Ld. Commissioner to assume jurisdiction under section 263 to revise every order of the Assessing Officer to re-examine the issues already examined during the course of assessment proceedings. The Mumbai ITAT Bench has dealt with Explanation 2 as inserted by Finance Act, 2015 in the case of Narayan Tatu Rane vs. ITO reported in (2016) 70 taxman.com 227 to hold that the said Explanation cannot be said to have overridden the liability as interpreted by Hon'ble Delhi High Court, according to which the Ld. Commissioner has to conduct the inquiry and verification to establish and show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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